A fixed level of damages payable to the project company/SPV– typically by a construction or operation & maintenance contractor – as a result of the contractor failing to meet contractual obligations. In the case of a construction contractor these will typically be Delay LDs and / or Performance LDs. An operation & maintenance contractor may be liable for LDs if Availability Guarantees are not honoured. Liquidated Damages differ from ordinary damages in two key ways:
- A party claiming liquidated damages is not required to prove its loss;
- Liquidated damages are recognised by the parties to the contract to be a genuine pre-estimate of loss in respect of a given delay period or performance shortfall
The first point makes claiming of such damages quicker and cheaper, while the second point makes it difficult for the contractor to claim that the damages being claimed are excessive / in the nature of a penalty.
Liquidated Damages may also be reflected/passed through under any corresponding Power Purchase Agreement